Delta Previews All-New SkyMiles Program for 2015

It has long been rumored that one or more of the legacy airlines were in the process of developing a replacement for their current loyalty programs. Like those of Southwest, JetBlue, and Virgin America, the new program was expected to reward travelers on the basis of their spend rather than according to the number of miles they flew. It was a prospect welcomed by some and dreaded by others.

Supporters and detractors of the revenue-based model can now debate the specifics of one such program-to-be, following Delta’s announcement earlier today that it will launch an all-new revenue-based version of its 33-year-old SkyMiles program on January 1, 2015.

The specifics are important, since Delta’s new program is almost as different from Southwest’s Rapid Rewards as it is from its own SkyMiles program. It is, in short, a hybrid, featuring spend-based earning but more traditional tier-based award pricing.

Earning Miles

Beginning next year, SkyMiles members will earn miles according to the price of the tickets they purchase. The earning rate will vary from five miles per dollar for general members to 11 miles per dollar for top-tier Diamond elite members. Members who purchase their tickets with a Delta SkyMiles credit card will earn an extra two miles per dollar.

Miles for flights on Delta’s airline partners will be awarded as a percentage of miles flown, which will vary according to the ticket’s fare class.

Redeeming Miles

Unlike the programs of Southwest and other low-cost carriers, Delta’s new program will retain a mileage-based award chart.

As it does currently, Delta will offer a capacity-controlled domestic coach round-trip award ticket for 25,000 miles. But instead of the current award pricing, which has three price levels for each region, the new award chart will feature five pricing levels for flights between each pair of regions (U.S. & Canada, the Caribbean, Europe, Northern Asia, Southern Asia, and so on).

Full details of the new award chart won’t be available for analysis until the 4th quarter of 2014. But it appears that Delta has neatly sidestepped the most-voiced criticism of wholly spend-based programs, namely that it’s impossible to get outsized value from your points when they have a preset value when redeemed for tickets at market prices. Under the new scheme, SkyMiles members will still be able to leverage the value of their miles by redeeming them for more expensive flights.

Other Program Changes

In addition to the earning and redemption changes, Delta announced the following:

One-way awards, for half the round-trip price

Miles + Cash awards

Improved award-booking widget on delta.com

There isn’t much that’s new or innovative here.

One-way awards have become an industry standard, so Delta is simply playing catch-up.

Allowing cash to be combined with miles is a commonplace among the hotel programs, and an option for JetBlue program members redeeming for vacation packages. It will add a modicum of extra convenience to the SkyMiles program, certainly. Whether it will be good value remains to be seen.

As with one-way awards, improvements to Delta’s website are long overdue.

The Winners & Losers

Since the new scheme is designed to “better reward the customers who spend the most with Delta,” it should come as no surprise that those who travel often on higher-priced tickets — frequent business travelers, for the most part — will fare best under the new rules. And conversely, those who fly infrequently, on cheaper advance-purchase tickets, will find themselves with fewer miles at the end of a year.

A thoroughgoing assessment of the new program’s value will have to be deferred until full details of the award chart are available, and, critically, until travelers have a chance to reality-check Delta’s claim that more low-priced awards will be available for booking.

But the premise of this and other spend-based programs is a compelling one: Customers should be rewarded on the basis of their contribution to a company’s profitability. That’s both fair and reasonable. And in fact, it’s always been the objective of loyalty programs. Miles were simply a handy proxy for spend, albeit an imperfect one. Hotels award points on the basis of spend, as do travel-rewards credit cards. And of course, spend-based programs have been the standard among low-cost carriers for several years now.

What Delta is doing is more inevitable than it is innovative. American and United will surely follow.

Reader Reality Check

Based on what we know so far, do you expect the new SkyMiles to be more or less lucrative for you, given your current travel patterns?

My total cost for requalifying for AA Executive Platinum one year was $6,100 and my typical RT fare still tends to average $260, so I don’t like the trend, but it doesn’t make sense for the airline to give me the same miles as someone that paid $600 for that ticket. Thank goodness for lifetime status.

Gilad Rom

I made United 1K last year by flying 72 segments, 125,000 miles overall. Not sure if I would benefit or not. I probably spent more than $30k on plane tickets, though.

Redgie

Delta proves again they do not care about us frequent leisure customers it sure makes the little CEO speech before the security briefing sound like bigot.
This new change will cost me about 50% of the ff miles I earn every year. First they rob me of my chances to stay Elite member and now they are going to reward me with even less ff miles.
Let me give an example: I fly twice a year to Europe and a couple of times a year domestic. Before the MQD change I was sure to be at least Silver every year (for the past 10+ years) and actually often even Gold depending on the number of domestic trips and the roll-over miles. I earn 10,000 ff miles a trip to Europe and 4,000+ on every domestic. Flights to Europe run around $1,000 (with tax), domestic around $400 (with tax). Since tax does not count toward MQD this means I do not reach $2,500.
And now thanks to the new ingenious money grabber ploy of Delta I will no longer earn 10,000 miles to Europe but only at best 5,000 but more likely 3,500 ff miles (or a 6500 miles loss) and domesticly at best 2,000 ff miles (more likely $1700) in stead of the 5,000 now.
So I am happy I decided to ditch my Delta loyalty after hearing from the MQD scheme, this new change in ff miles earning only affirms I was right. From now on I go with the cheapest ticket. This year this has already saved me $500.
And oh yeah I have almost 500,000 life ff miles … guess I bet on the wrong horse.

SK

Funny the article is almost verbatim for what the Diamond Desk is telling their “best customers”. Here are the facts, you will earn little more than half of what you earn in 2014. Second, Delta leaves the miles required for a rewards seat at 25,000 and up (and I don’t believe they will have more lower priced seats). Bottom line is you will get half as many free tickets. Since January 2013 Delta has been the innovator in takeaways. First they announced dollar based qualification for elite levels. Then they took away Diamonds ability to change their ticket withing 3 hours time for no fee (they say they improved it to 24 hours in advance but that isn’t true as the same fare base must now be available in order to make the change fee free), they increased the fee for the Sky Club and now will not allow you to bring guests unless you pay much more. Now they are devaluing miles by 50%. What is next Delta? Up until a year ago I thought Delta was the airline to fly, no longer. All that Delta needed do to make this palatable was base award seats by dollars as does Southwest then this wouldn’t be as big a deal.

James Landherr

Just did some sample calculations. New program means generally we will all earn less except for short
trips. Based on some of the best prices out there now,

Delta says this is a better deal! Only for business customers paying top dollar for flights.
This is not working in favor of people who travel 3- 4 times a year.

http://www.designedwork.com James Pepitone

“The rich get richer and the poor have babies.” So the well-heeled customers who buy expensive tickets get rewards they don’t need (or necessarily value all that much), while the budget-conscious customer who wants to travel but must do so using cheap fares sees their opportunity to earn highly valued rewards reduced. This sure isn’t going to do much to win over the flying masses, while it pays bigger bonuses to the people who don’t need them. Somebody at Delta may want to trade in their 1950′s classical economics textbook on a 21st century behaviorial economics replacement (i.e., economics discovers human nature).